The Department of Energy’s Advanced Vehicle Technology Manufacturing plans to loan small EV company Rivian Automotive (NASDAQ: RIVN) $6.6 billion. As part of an analysis of Rivian’s finances, as the announcement was made, The Wall Street Journal put Rivian’s losses at $19 billion since it went public in 2021. It indicates how difficult it will be for the company to become profitable with unit production that remains tiny.
The loan would consist of $6 billion in principal and $600 million in capitalized interest. Much of the money would be used for a production facility in Georgia. However, the fact that Rivian can produce more vehicles does not mean people will buy them. Rivian’s shares rose only modestly the second day after the announcement.
A month ago, Rivian received an investment of as much as $5.8 billion from VW. The money will go into Rivian, and a JV will be between it and the second-largest car company in the world. Rivian gets badly needed capital. VW gets access to advanced EV technology. VW has struggled with EV sales, and its business is in trouble. It may close plants in its home market of Germany which it has not done in its history.
Rivian’s shares rallied briefly on the news about the federal government loan and on the VW news, but the VW rally only lasted a few days, and the second announcement barely helped the stock. So far this year, Rivian’s shares are down 48%, while the S&P is 25% higher. Over the last five years, Rivian’s shares have fallen 90%. That is what a $19 billion loss gets you.
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Author: Douglas A. McIntyre
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